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Saturday, July 22, 2017

22.07.17 Policy Disruptors in Indian Economy

22.07.17 Policy
Disruptors in Indian Economy

The recent policy decisions on demonetization of higher
denomination of Indian currencies and implementation of Goods and Services Tax
have generated so much heat and debate among the public – both informed and
ill-informed. Everyone has become an expert commentator now. That includes me
too.

Every government has been taking policy decisions as a
matter of routine; however, some of them have disrupted people’s life so much
that they were tantamount to life-altering changes.

In the past too, India had faced several policy disruptors
that seriously altered the life of the common man. Some of them were:

2.Green Revolution and White Revolution policies
during the 1960s & early 1970s

3.Indira Gandhi’s decision to nationalize banks
and insurance business during 1969 and after

4.Economic liberalization initiated by P.M.
Narasimha Rao and F.M Manmohan Singh during 1991 and after

5.Demonetisation of higher value currencies during
November 2016

6.Introduction of GST on 1st July 2017

There may be others too, but I am mentioning only a few
major economic policy disruptors.

When every one of these policy disruptors came into effect,
there were vociferous criticisms from several quarters and also widespread
support from other sections.

Generally, people tend to react overzealously prematurely,
not wanting to wait for some time for the policy changes to produce the
intended results. As the decision makers in India have always had to take the
impact of their decisions on their electoral prospects into account, they had
also shown kneejerk reactions to public anger against some of their policy
decisions, however well-intended their decisions were. Net result: the policy
changes were introduced in half-hearted measures, slow paced, compromised on
several counts, and marred by political calculations.

Probably, the people were never properly informed and
educated on these policy changes. Probably, the decision makers failed to take
the nation along while taking disruptive policy change decisions.

Yet, the fact remains that these policy disruptions have a
long term effect; sometimes, it also takes time to fully realize the impact of
these policy disruptions on people’s life. For instance, when Sri P. V.
Narasimha Rao, the then Prime Minister and Dr. Sri Man Mohan Singh, the then
Finance Minister brought in liberalization of economy during the early 1990s,
there were widespread criticisms. Very little, people realized that many of
these criticisms came from people with vested interests who never wanted to
lose their control over things and events that they enjoyed during the license
and permit raj. But, some 20-25 years down the line, today, if India is
competing with some of the world economic powers in every front, the credit
must go to the Rao and Singh combine. People of India, today, enjoys a lot more
comforts of life because of economic liberalization. However, it must be
admitted that even then, the liberalization was not done with full force as it
should have been done because Mr. Rao government didn’t enjoy the support of
the law makers and were apprehensive of people support. Of course, they were
also under the compulsion to introduce those policy changes to bail out the
country.

The same way, the recent disruptors: demonetization of
higher value currencies and introduction of GST need to be viewed with the same
long term approach. They were far reaching decisions, complicated, and will
impact people’s life in different ways – benefitting some and affecting some.
Yet, we need to wait for some time for these policy changes to bring about the
intended effects. Somehow, I strongly feel that most people tend to rush with
criticisms rather than wait. In this, unfortunately, most people tend to be
misguided by self-centered politicians, media, and vested interests.

The major disruptors I have mentioned had all brought
tremendous good for the nation and the people, in the overall sense, though
there were some unintended negative effects too. For example,

1. The country became a strong producer of steel,
cement, and electricity due to Nehru’s industrialization policy.

2.India is now self-sufficient in production of
food grains and milk.

3.Banking and insurance spread to several small
villages, benefitting millions of poorer sections of the people due to
nationalization of banks and insurance by Indira Gandhi.

4.Indians got access to several world-class goods
and services that also induced positive changes in our standards of production
and delivery of goods and services. We became more efficient and quality
conscious. Millions of poorer families became affluent. All these happened due
to liberalization of economy by Rao and Singh.

5.The impact of demonetization is still to be
fully understood. Only time will tell the positive impacts. The same with
introduction of GST too.

So, let us wait for the full impact of demonetization and
introduction of GST to take place. Hell is not going to break lose right now. There
will be inconveniences everywhere. Vested interests will continue to criticize.
Let us not be misled by people with vested interests.